Letter to members regarding the financial economics perspective on public pension plan funding

As you may know, a few members of the former Pension Finance Task Force (PFTF), a task force that had been jointly sponsored by the American Academy of Actuaries and the Society of Actuaries, have alleged that the Academy and the Society have tried to suppress or “censor” their ideas. This allegation seriously misrepresents the facts. Most recently, their accusations were aired in an op-ed that appeared in the Wall Street Journal last Friday.

What is the purpose of this communication?

I’m writing to clarify the Academy’s publication standards and the process we use to review proposed publications. I will also answer the most common questions we have received regarding a preliminary draft of a paper titled The Application of Financial Economics in Public Pension Plans, which was developed on behalf of the American Academy of Actuaries and the Society of Actuaries by the former joint Pension Finance Task Force. Those questions center around the application of the Academy’s standards and review process to that paper.

What is the Academy’s standard review policy?

The standards for Academy publications are clearly described in our “Guidelines for Making Public Statements.” The Academy is the voice of the U.S. actuarial profession to the nation. Unlike a trade association or union, we do not represent the narrow commercial interests of our members or the industries they work in. Our publications are valued because we are recognized as a credible, nonpartisan resource. Maintaining this credibility requires us to be willing to objectively consider the concerns of all affected stakeholders. We can’t fully serve the public interest if we approach it in partisan or self-serving manner. All Academy volunteers are required to acknowledge our Conflict of Interest Policy and attest to compliance with continuing education requirements. Every Academy document that is published goes through not only peer review, but a legal review, a policy review, and a communications review to ensure that it is accurate, objective, nonpartisan, and effective.

Why is the Academy’s review process so thorough?

Because we owe it to the public to get it right. To accomplish our mission, we must make every effort to ensure that what we publish is not just technically correct, but independent, objective, even-handed, and readable. This requires a thorough review process that is consistently applied to all of our public statements. Insisting that all of our publications must go through the full review is not Academy “censorship.” It’s the reason legislators, regulators, and journalists turn to the Academy as a trusted, reliable source of independent, objective insights on critical public policy issues.

What is an individual volunteer’s role in an Academy publication?

The Academy speaks for the profession, and our publications reflect this. Almost everything the Academy publishes is identified with an Academy committee or task force —not with individual authors. Our issue briefs, monographs, comment letters, and press releases have the logo of the Academy, are clearly attributed to the Academy, and are statements by and for the Academy. I may contribute to an Academy issue brief, but when someone quotes it, they will legitimately say “According to the American Academy of Actuaries.”

So, when I help draft an Academy issue brief, I’m no longer speaking for myself, but for the Academy. It requires a special kind of review process, and demands a level of even-handedness and objectivity that would not be necessary in an article written for a publication such as the North American Actuarial Journal, which is intended to create a forum for individual actuaries and academics to present their research and ideas. That even-handedness has to be built in during the drafting and review process. Where the NAAJ might publish competing articles, it makes no sense for the Academy to publish “competing” issue briefs. At the Academy, the debate occurs before statements are authorized and made public. That’s why so many of our publications take a “compare and contrast” or “alternative points of view” approach.

Why didn’t the Academy publish the paper?

The paper mentioned in the op-ed was subject to the same robust policy and editorial review process we use with all of the Academy’s publications. A working draft was submitted by the task force for the initial round of review. None of our reviewers thought it was ready for prime time. Setting substance aside, it was poorly written, poorly organized, and difficult for nonspecialists to read. The tone was, in many places, more appropriate for an economic manifesto than an objective policy analysis. Upon receiving the first round of peer review comments, several members of the task force rejected the process and left the table. That made it impossible for the task force to bring the report up to the Academy’s standards.

Is the Academy trying to suppress the financial economics perspective on public pension plan funding?

No, it’s actually quite the opposite. We’ve advanced this perspective. We have a long track record of promoting discussion of the application of financial economics to pension funding, as well as the broader issue of the adequacy of current pension funding levels. A quick glance at our website will show a series of papers and letters on this topic that have been published by the Academy and promoted to our membership, public policymakers, and the media:

The accusation that the Academy is suppressing the discussion of financial economics in the context of pension plan funding is simply false on its face.

Is the Academy censoring members of the former Pension Finance Task Force?

No. The complaining individuals remain prolific speakers and writers on pension finance topics. The Academy encourages them to advance their thoughts, insights, and ideas in whatever other forums they may choose, and that choose to publish them.

Is this series of events the result of some misunderstanding?

No. There was no misunderstanding involved.

The paper mentioned in the Journal op-ed was not a paper that was submitted to the Academy and the Society for publication, as you or I might submit a paper to the North American Actuarial Journal or Contingencies. Rather, it was developed by a joint Academy/Society task force—including work by others on the task force, and by staff of both organizations. The task force included a number of experienced volunteers who were familiar with both our publications standards and our review process.

The members of the task force knew they were working on behalf of the Academy and the Society. There was no misunderstanding as to the nature of the paper, nor that it was subject to the Academy’s rigorous review process—a process that hundreds of dedicated volunteers routinely use. But when that review process became more difficult than some members of the task force were willing to countenance, rather than engaging in a dialogue with reviewers in an effort to bring the paper up to a level suitable for publication, they simply walked away.

Why didn’t the Academy agree to allow the authors to take the paper somewhere else?

The paper was never an individual work. It was developed on behalf of the Academy and the Society of Actuaries by a joint Academy/Society task force—including work by others on the task force, and by staff of both organizations. A few individuals chose to undermine our quality control process, and to rob us of the opportunity to complete and publish a paper in which the Academy and the Society had invested significant time and effort.

It is entirely appropriate for individual members of an Academy group to talk and write about their insights in other forums. It’s natural that the thoughts, arguments, terminology, and conclusions may often be quite similar to those they have helped develop on behalf of the Academy. But it is not appropriate for individuals who are frustrated by the review/edit cycle to short-circuit it by simply taking a draft Academy document, representing work done by an Academy task force or committee, and publishing it elsewhere under their own names.

Is it true that the Society of Actuaries will be publishing the original task force paper?

We are aware that the Society of Actuaries plans to publish the paper in the Pension Forum. Because certain members of the task force refused to complete the review process, it will not bear the imprimatur of either association, but will be published in the name of those individuals. The Society discussed these publication plans with us ahead of time, and the Academy understands its reasons for doing so. We would note that these individuals have asked the Society for additional time to edit the last draft of the task force paper before it is published under their names.

Has the Academy stopped working in on public pension funding issues?

No. The Academy remains committed to publishing objective, unbiased public policy analyses on topics of public importance. This includes appropriately reflecting the potential contributions of financial economics to the design, management, and financing of public pension plans. While certain members of the PFTF decided to walk away from the Academy process, we have continued our careful consideration of the concepts in the last draft of the PFTF’s paper. The PFTF draft could not meet the Academy’s publication standards. Nonetheless, we support a robust discussion of these concepts and ideas so that both actuaries and the public may have access to them. We will shortly be publishing a paper on public pension plans that will include concepts from financial economics.